The archived blog of the Project On Government Oversight (POGO).

May 21, 2010

Can a Lab Paid by BP Assess the Environmental Damage from the Gulf Oil Spill Without Bias?

The extent of penalties levied against BP for environmental damages will
be based largely on analysis by a laboratory paid by BP,the
New York Timesreported
yesterday. That lab, B&B
Laboratories, is an affiliate of TDI-Brooks
International, a Texas-based firm that "provides scientific services
on a global basis with a focus
on petroleum geochemistry."

As
the Times, notes, these fines could amount to hundreds of
millions of dollars. BP is footing the bill due to a seemingly
well-intentioned law in response to Exxon-Valdez to hold contractors
accountable by making them pay the bills, which simultaneously gives BP
control over this process.

While TDI-Brooks notes that it has
worked with government agencies in
the past, the client
list on the company's website suggests that the
bulk of the firm's business comes from the oil industry. This seemingly
lopsided client portfolio raises questions about whether the lab can
truly
assess these environmental samples without bias. What incentives does
TDI have to work in the interest of taxpayers? Does the company feel
pressured to be gentle with its analysis? Would an aggressive
determination of environmental damage jeopardize future business with
BP, or business with any of the other 102 oil companies it lists as
clients? Are there any firewalls or
other tools in place at the company to ensure there are no internal
conflicts of interest?

This, of course, isn't the first time that the
federal government has
relied upon industry to perform what may be an inherently governmental
function. POGO blog readers may recall that MMS relied on an industry
group, Lukens Energy, to provide analysis to push forward the
now-cancelled RIK program against the advice of government analysts who opposed the program. From our report, Drilling the Taxpayer:

In 2003, MMS contracted with
the Lukens Energy Group
to conduct an independent assessment of the RIK program's transition
from a pilot program to a full-scale operation and chart a five-year
business plan.
Lukens' report to MMS concluded that the RIK program had "performed
remarkably" and that "the pilots have proven that RIK can succeed
operationally while at the same time representing a viable option when
compared to royalty-in-value."

This finding is not surprising: the
independent review by Lukens
turns out not to be so independent. From 1998 to 2000, Lukens Vice
President Fred Hagemeyer had chaired the industry's Royalty Strategy
Task Force, which vigorously supported the use of royalty-in-kind. In
2000, Mr. Hagemeyer even received an award from the American Petroleum
Institute, for his "policy development which led to significant
improvements to the Minerals Management Service's oil valuation rule and
expansion of its fledgling royalty-in-kind projects."(Emphasis added)

Not only was Lukens not independent
in its position about RIK, but
the RIK program was not independent of relationships with Lukens. A
recently released DOI IG report determined that Lukens Vice President
Hagemeyer was considered a "trusted advisor" by RIK Program Director
Greg Smith, and that the two communicated extensively during the
contract selection process, despite regulations clearly prohibiting
such contact between bidding companies and MMS officials.
The IG further reported that during the same time period Lukens'
contract bid was being considered by MMS, Hagemeyer assisted then-RIK
Deputy Program Manager Smith in his efforts to market Geomatrix, a firm with which Smith was improperly
consulting on the side.

Using Lukens' "independent" findings as justification, MMS expanded the
RIK program and made it fully operational in 2004

As
always, feel free to let us know your thoughts in the comments section.

In July 2008, the California Supreme Court ruled (Miklosy v. the Regents of the University of California (S139133, July 31, 2008) that UC employees who are retaliated against because they report wrongdoing cannot sue for damages under the state’s Whistleblower Protection Act, so long as the University itself reviews the complaints in a timely fashion. The ruling uncovered an oversight made by the Legislature when the Act was amended in 2001, which provided legal standing for all other state employees to seek damages.

“This is the classic case of the fox guarding the hen house,” said Yee. “UC and CSU executives should not be judge and jury on whether or not they are liable for monetary claims. This was not the intent of California’s whistleblower law.”

In the Miklosy decision, three of the seven judges urged the Legislature to consider changes to the law, as the current statute undermines the purpose of the Act.